I'm a tech, social media and environmental addict. I've also written for many major publishers such as National Geographic, Technorati and The Huffington Post. I have also worked with a variety of different startups around the globe as well as larger advertising agencies in the United States and the UK. I currently live in San Francisco where I attend as many tech and business conferences as possible to gain more knowledge and transfer my knowledge to other people. If you ever want to find me in my free time look for the nearest disc golf course or dog park where I frequently take my dog, Zeus.

5 Reasons Why Crowdfunding Is The Next Big Investing Trend

Over the last several years crowdfunding has become an increasingly popular option for both entrepreneurs and investors. According to Statista, In the United States alone, there are 191 crowdfunding platforms. They also discovered that the volume of global crowdfunding platforms skyrocketed from $530 million in 2009 to over $2.8 billion in 2012. When you also consider that over 95% of business plans that were received by accredited investors and VCs have been rejected – via the Huffington Post - it’s no surprise that entrepreneurs are looking elsewhere for funding.

Crowdfunding has already proven itself to be a successful alternative in acquiring or investing money. And it’s likely not going anywhere anytime soon. It will most likely continue to rapidly grow. In fact, crowdfunding is poised to become the next big investment trend. And here’s five reasons why.

1. Convenience

Have you ever asked for money? It’s not exactly the highlight of your day. But that’s nothing compared to applying for a loan or meeting with potential investors. It’s one of the most nerve-racking experiences that entrepreneurs have to go through. But, that’s not the case with crowdfunding.

Compared to all of the paperwork and preparation needed for loans, setting a crowdfunding campaign is a breeze. Just select the right platform, put together a video and offer enticing rewards. While there’s still a need for something that’s important for the long-term, like a business plan, it’s extremely refreshing to only have to make your presentation and pitch just once.

Crowdfunding is also a great for both investors and entrepreneurs to discover each other. Instead of relying on traditional methods and investing options, crowdfunding provides a convenient and exciting way of obtaining an investment or finding a new venture to fund.

2. Validates a Concept

Having an idea is one thing. Proving that the idea can make a profit is another thing. Whether you need to convince yourself or investors that there’s money made, crowdfunding provides a great opportunity to see where the market stands. I

If you launch a successful crowdfunding campaign, it not only proves that there’s an interest in your idea, it also shows that people are willing to spend money on it. That’s a rather effective way in validating your concept.

3. Reduces Risk

Because crowdfunding validates the market, both entrepreneurs and investors don’t have to worry about taking on as much risk. Instead of dumping your savings into a business venture that doesn’t have a sustainable market, you can test the water without much of an investment. In fact, even if your campaign isn’t successful the money that was given is returned to all donors.

Investor John Rampton who’s invested in several crowd funded campaigns says “Another way that crowdfunding reduces risk is by reducing the cost of inventory. Let’s say in the past a clothing company would have manufactured 1000 pairs of jeans but sold 700 pairs. They still had to purchase the 1000 pairs and basically just take the loss on the jeans that weren’t sold. With crowdfunding that same company knows ahead of time on how many pairs of jeans that need to be produced. Instead of wasting money on inventory that doesn’t sell, you only sell what’s been ordered.”

4. Real-time Feedback

Throughout the course of a crowdfunding campaign there’s an opportunity to receive and review feedback and ideas. In the past, some questions or concerns weren’t approached during this early part of the stage. Now you can create polls or surveys to see what people enjoy or don’t like about your product. Best of all, this feedback can be reviewed in real-time. This can help you make the right adjustments faster than what it would have been in the past – which means getting your product to market as soon as possible.

However, the most important part about regarding feedback is that it builds a community. Think about that for a second. You’re able to build a following of loyal customers before the business has even launched. And you did this by engaging them and listening to their suggestions.

Post Your Comment

Post Your Reply

Forbes writers have the ability to call out member comments they find particularly interesting. Called-out comments are highlighted across the Forbes network. You'll be notified if your comment is called out.